ISSUE 3: Healthcare sector cries for a jab

Wednesday November 14 2012

In Summary

Kenya’s health sector financing policy has undergone several changes since independence. After free medical services in the 1960s and ’70s, the government introduced cost-sharing in the late 1980s.

This policy shift led to massive deterioration of services, mainly due to limited government resources. Consequently, many Kenyans turned to private clinics, pharmacies, traditional healers, and even self-medication.

Today, Kenya allocates an average of eight per cent of its Budget to the health sector, falling short of the Abuja Declaration, in which African governments commit to allocate 15 per cent.

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By DAVID MUTHAKA and PURITY NJERU

Under Kenya’s new Constitution, access to quality and affordable healthcare is a basic human right. Yet, as a country, we are very far from making this a reality.

The challenge for the leadership that comes into office after the March 4 elections is how to progressively work towards ensuring that all Kenyans have access to quality healthcare.

And coming up with innovative and creative financing options is the key to realising this dream.

Kenya’s health sector financing policy has undergone several changes since independence. After free medical services in the 1960s and ’70s, the government introduced cost-sharing in the late 1980s.

This policy shift led to massive deterioration of services, mainly due to limited government resources. Consequently, many Kenyans turned to private clinics, pharmacies, traditional healers, and even self-medication.

In 2011, Kenya’s total per capita spending on health was about $11 (about Sh900) compared to the $44 (Sh3,600) recommended by the World Health Organisation.

The cost-sharing programme has had little impact as less than 10 per cent of the total health budget is raised through it.

The hope of generating resources through the National Health Insurance Fund is limited and uncertain due to the institutional weaknesses which have characterised the fund.

Indeed, more than 40 per cent of the funds go to administrative expenses, while about 30 per cent are reimbursed to health facilities offering inpatient services.

Today, Kenya allocates an average of eight per cent of its Budget to the health sector, falling short of the Abuja Declaration, in which African governments commit to allocate 15 per cent.

Most of the allocation goes to salaries, hence the poor services and frequent shortages of drugs and equipment in public hospitals.

What this means is that the public bears most of the burden of health financing. According to the Ministry of Health, out of the total amount spent on health in Kenya in 2009/2010, 36.7 per cent came from households, government (28.8%) and donors (34.5%).

Whereas the government’s health expenditure has been financed from tax revenues, the private sector raises funds from user fees and insurance premiums.

Those who use health insurance are a tiny fraction among the upper middle class who are in employment and business. Demand for health insurance is likely to rise with government provision of quality healthcare.

This is because the cost will be low. This would only happen if all the services, including drugs and supplies, were available in the government institutions. If not, the cost will be higher as people will buy them from private institutions.

Healthcare financing in other countries ranges from government financing to private and social health insurance. However, very few countries have improved health indicators with a huge proportion of the expenditure coming from out-of-pocket payments.

There is need to change the strategy in Kenya so that the burden is reduced from direct financing by households to a strategy that pools resources, like private health insurance, social health insurance or government financing.

If the government was to meet its Abuja Declaration obligation, there would be minimal scarcity of resources in the health sector. If it allocated 15 per cent of its budget to health, the funds to the sector would be between Sh70 billion and Sh90 billion.

This would increase the per capita allocation from $18 (Sh1,500) in 2005/06 to $31.2 (Sh2,600) in 2008/09; near the WHO recommendation of Sh3,600.

However, if the resources are not ring-fenced, they will be subject to political processes surrounding the budget process, where they can be diverted to other areas.

Earmarked taxes from specific commodities or services can be set aside to fund the health sector. This will reduce diversion and political interference as there is increased predictability and guaranteed direct allocation of funds to the sector.

Sin tax has a potential of generating about Sh15 billion, which would cover the Sh50 billion gap. It is estimated that Kenya loses about Sh264 billion from beer and alcohol tax revenue.

Payroll taxes which involve contribution by employees and employers towards a fund that pools the resources for health care is another option. The concept being used to contribute funds to NHIF can be expanded.

Employees and employers in Kenya could triple their current contributions to NHIF to generate more resources in excess of Sh10 billion, translating to a minimum of Sh90 for the lowest category earning between Sh1,000 and Sh1,499, and a maximum of Sh960 for those earning Sh15,000 and above per month. The fund can thus finance in-patient and out-patient services.

Private health insurance that caters for services not available from the basic health care provided by the public sector should be expanded. There is also a need for health insurance that covers those not catered for by the conventional schemes.

Community-based health insurance, which has been successful in Benin, Nigeria, Senegal, Tanzania and Uganda, should be promoted.

Mr Muthaka is a Policy Analyst and Ms Njeru an Assistant Publications Editor at KIPPRA.